Oil's Well

God takes care of babes, fools, and the United States of America.

As the Obama Depression wears on, it sometimes seems like this isn't true anymore.  Actually, it's a more appropriate observation than it has ever been: what other nation has managed to survive anything like the debts we've run up, the military failures abroad, the complete collapse of our unitary culture and national integrity, and still be, by a surprising margin, the richest nation on earth?

Whether President Obama is merely a destructive, incompetent fool or an evil genius bent on destroying America will be debated for many years to come, the answer to which really can't ever be known.  A trip to your local gas station, however, shows that God is still on the job, taking care of the United States of America in spite of our feckless, incompetent (at best) government.

Despite the explicit, intentional actions of President Obama to the contrary, the gasoline price has been dropping precipitously.  Remember, when running for President, Obama called for vastly higher costs for energy to reduce pollution and prevent global warming.

In a way, he's been partially successful.  There has in fact been no global warming for the past 18 years and counting, although you won't hear the warmists admitting it.

As far as raising the cost of energy, though, that's the one destructive effort in which Mr. Obama has failed utterly.  Despite the baleful regulations of the EPA and attempts at creating new taxes on carbon, American ingenuity has triumphed through the process known as "fracking."

Fracking breaks up deep underground shale beds that contain oil, which previously were impossible to pump out.  By making these formerly useless oil reserves accessible, the global supply of petroleum has increased enormously.  As Adam Smith teaches, whenever you increase supply you'll end up with a lower price.

Combined with the Canadian oil sands, America finds itself in the best energy position since the 1940s: we can obtain the majority of our fuel needs from friendly, stable countries, and those reserves are so vast that the infamous OPEC oil cartel no longer has the ability to hold prices artificially high.  We can pump as much as we need and let the price fall.

The immediate effect is the same as a massive tax reduction.  Virtually every modern activity requires energy, most of which ultimately comes from oil.  If the oil price goes lower, the prices of almost everything drops, making all of us richer.  Considering that wages have been stagnant for years and many services have been increasing in cost, that's a much-needed relief for America's suffering middle classes.

The Great Game Slides On

There's an even more interesting effect of low oil prices, though.  Cheaper gas is good for everyone who buys anything or drives a car.  Surprisingly, lower oil prices don't really hurt American major oil companies all that much because most of their money is made in refining and distribution.

Whom do the lower prices really hurt?  Those who own the oil in the ground and want to sell it.  That means some exploratory divisions of the international oil majors and the smaller regional wildcatting companies.

Mostly, though, governments own the oil, via nationalized oil companies that were originally expropriated from the British and American majors that discovered the oil decades ago.  Most of these are governments like the usual Middle Eastern suspects, Russia, and Venezuela, which are unfriendly, tyrannical, or both.

These governments do a very bad job of running their countries' economies.  What keeps them in power is the free money they get from pumping oil out of the ground and selling it to the rest of the world.

When the price drops, government revenue drops along with it, which means there's a whole lot less money to bribe restive populations with or keep the elites sweet.  The economies of Russia, Venezuela, and most of all Iran, are suffering grievously from the loss of revenue.

There might be a crafty OPEC plan here: the thought appears to be that new fracking sources cost more money than the traditional drilling found in most countries, and that the frackers will be the first to go bankrupt thus letting the bad actors jack up their prices.  Although some higher-cost development plans might be postponed until prices go back up, once an investment has already been made, the cost of continuing to operate a working fracked well is competitive with operating wells in other countries.

In a way, it's kind of like how Reagan spent the USSR into bankruptcy: Soviet Russia's economy simply didn't have the size, strength, or diversity to keep up with his Star Wars investments.  Similarly, Iran and Venezuela don't really export much except oil; Russia also exports a great deal of natural gas, but that price has been plummeting too.

It's always pleasant to see your enemies fall on hard times, but it can be dangerous.  A time-honored way for dictators to distract their population from economic problems is by starting a war, and Vladimir Putin has been following this playbook for several years now.

Ever wondered why it was so important for Russia to steal Crimea and invade the eastern chunk of Ukraine, which has been independent and at least somewhat stable for several decades now?  Simple: it allows Putin to beat the nationalist drum and to blame Russia's choking economy on Western sanctions much as Fidel Castro has done for longer than almost any of us have been alive.

Bismark's Other Observation

The Iron Chancellor had another observation about the good fortune of the United States that's both pithy and relevant:

The Americans have contrived to be surrounded on two sides by weak neighbors and on two sides - by fish!

This reminds us that, even if the worst comes to the worst and Europe is torn apart in the conflagration of Russian invasion, or the Middle East is consumed in a war of Shia vs Sunni with the Israelis cheering for casualties in general, we are a long long way away from any of that.

Of course we'd get involved just as we did last time.  In the 1940s, countless thousands of Americans gave up their lives in defense of freedom and untold amounts of American toil and treasure were blown apart all over the world.

After it was all over, though, America found itself the only significant nation in the world that hadn't been entirely shellacked.  Our factories provided the materials for the rest of the world to rebuild over twenty years, leading to the "Golden Age" of American wealth and power like no other.

History isn't likely to repeat itself in quite the same way - for one thing, today's Workshop of the World speaks Chinese.  Still, we're in a better position for this economic battle and potential military conflict than nearly anyone else.

God is still looking out for the United States of America, and He's clearly far more powerful in our favor than Mr. Obama is to our detriment.  Remind yourself of this every time you drive past a gas station and you'll feel much better.

Petrarch is a contributing editor for Scragged.  Read other Scragged.com articles by Petrarch or other articles on Foreign Affairs.
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